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Counterfeit roads lead to China
So why do counterfeit parts infiltrate the global supply chain and why is it usually through the independent broker? Two reasons why counterfeit parts are seeping their way into the chain: The economic boom of China and the subsequent shifting of many manufacturing operations to China and the growing use of the Internet as an acceptable tool in supplier development.

As China is going through an economic renaissance, many semiconductor manufacturers are shifting their production operations to China. As more and more leading edge or state-of-the-art components are being made in China, the chances that these products disappear off the assembly line and into the hands of the counterfeiters increase significantly. The counterfeit operation can either remark existing semiconductor packages to match that of the new part or, for the more insidious operations, reverse-engineer the entire product, manufacture it and sell it as the original. There is also a small makeshift industry of salvage that is growing in China where people dig through the refuse of manufacturing companies to find parts, which they hope to sell to prospective buyers. These parts are usually damaged in production and are useless.

There is also the rise of the Internet as a trading tool. Over the last few years, the Internet became a great place to buy and sell anything to anyone anywhere. Naturally, the day would come along where it would be possible to purchase components the same way. There are numerous web pages on the Internet that allow suppliers to post their inventory online and in real-time so that buyers, or independent brokers acting on behalf of buyers, can quickly find sources for the parts they need.

The Internet helps counterfeiters out in that it affords sellers a chance at complete anonymity. It eliminates the need for meeting face-to-face with whom you are buying parts from. You're desperately seeking a part so you search online and see that "JA Components" is showing inventory. JA could be a large international part brokerage with offices around the world or it could be a garage in China. If you are in a bind and they claim to have the inventory you will probably take the chance on buying it. Meanwhile JA Components has produced a counterfeit part to meet your demand and ships you said product. By the time you have discovered its counterfeit and you want to recoup your investment, it is too late and JA Components has closed up shop. Strangely enough, you do another search for those same parts and another store "AJ Components" with a different email and address is showing inventory.

These unscrupulous part brokers use their anonymity to spy on the marketplace and see what parts are in demand. As demand increases, and the supply is not available, the cost rises exponentially and a counterfeiter sees a golden opportunity. Suddenly a part that was not available a few hours ago is available in the thousands. In the global supply chain all it takes is an Internet connection to set up shop as an independent broker or distributor. For counterfeit parts, it opens the gateway from one side of the world to the other.

Countering the counterfeiters
This is not a personal attack on the independent brokerage scene. Semiconductor Insights still buys a good amount of components from independents, even though we have been a victim of buying counterfeit inventory though that method. These brokers are honest retailers, looking to fill a supply need. Many independent brokers are now taking action in trying to get counterfeit parts out of the supply chain. Counterfeit parts affect them greatly because the strength of their business operations comes from developing trust with their clients. Selling them a counterfeit component is a virtual "kiss-of-death" for their business as it could adversely affect the client's production line and spell the end of their buyer-seller relationship.

These brokers have formed the Electronic Resellers Association International to improve quality control and report within their network on parts they have received as counterfeit from brokers overseas. Flagging the disreputable brokers is their way of policing themselves. It is an uphill battle though, because like I mentioned earlier, a lot of these disreputable brokers close up shop once they have been rooted out and open up again under another name. But at least they are trying, right?

Visually, a counterfeit part is hard to distinguish from the original to the untrained eye. These parts are sold on the open market as legitimate parts and can make their way as components in legitimate products wreaking havoc for a company. These parts often make their way into downstream products because most large-scale manufacturing operations do not have the resources to inspect every part and component going into their final product.

Unfortunately, there is no easy answer to protect yourself from buying counterfeit parts. Organizations like the National Electronics Distributors Association (NEDA) and the Coalition Against Counterfeiting and Piracy (CACP) in the US, try to educate buyers and purchasing groups to buy strictly from authorized distributors. The problem with this approach is that it is unrealistic. Every buyer is eventually going to find a situation where the authorized distributor is unable help them while an independent broker can. Because of that circumstance, there is always a chance that counterfeit parts will find an unwilling home. The onus will be on the supply chain, the buyers and the sellers, to determine methods to stop the influx of these fake components.

Gregory A. Quirk (gregoryq@semiconductor.com) is technical marketing manager and Allan Yogasingam (allany@semiconductor.com) is sourcing manager at Semiconductor Insights, A CMP Technology Company.

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